Budget Leftovers
January 09, 2007
Contributing Writer: Terry Rigg
It is extremely difficult to setup a budget, especially when you are behind on some of your bills. Even if you can make your regular bills and expenses fit neatly into your budget, what can you do if you don't have the money to catch up?
I have listed several methods and circumstances below that may help manage setting up your budget and begin to pay those overdue bills. Since there are as many different budgets as there are people that try to set them up, this list may not be all inclusive. It may, however, give you some ideas that will fit your individual problem.
Unless you don't have any income at all, there are a couple of things that should never be late. Your rent or house payment and utilities should be paid first, even at the expense of other bills. This is simply a matter of survival.
The first thing you need to do when setting up a budget is to determine how much actual take home income you have. Then determine the amount of your normal bills and expenses. The Complete Budget and Bill Organizer http://www.homemoneyhelp.com/BBOonline.html explains this in greater detail and provides forms to put it on paper.
The below methods assume that you have enough money to cover your normal bills and expenses but have some bills that have an amount that is overdue:
When you are setting up your budget and have overdue bills you need to cut your expenses to the bare bones. This doesn't mean going without food. However, there are many ways to cut back on expenses. You can find hundreds of them by visiting my Budget Stretcher Partner sites listed at http://www.homemoneyhelp.com.
You should always make the initial contact to the company any time you aren't able to pay a bill on time. Once you have your budget setup, see if there is any money left over to start paying the amount that is behind. If you do have some money left over, when you contact the company, find out if they will accept paying a little extra each month, without penalty, until the overdue amount is paid in full.
Contact a your local Consumer Credit Counseling Service. You can find them in your phone book. They can assist you by contacting your creditors and establishing a payment schedule that will fit your budget.
If your overdue bills are credit cards, consider transferring your balances to either a credit card you already have or can obtain. This will do a couple of things. It will normally lower your monthly payment and it will eliminate your overdue status. Be extremely careful doing this. The credit card companies you paid off will be using every means they have to get you to use their credit cards again. Cut them up and notify the company to close the account.
Look for ways to get extra money just for the purpose of paying your overdue bills. This can be either a temporary part time job or selling something that you
can do without.
If you own your home and have equity in your property, you may want to consider a bill consolidation loan. While this seems like an easy out, many people start obtaining more debt after they receive the loan since they have some disposable income. There are pros and cons to bill consolidation loans and you would be wise to investigate it thoroughly.
If you have exhausted all of the above options, you may have to consider one of the below options. You must remember that filing bankruptcy can stay on your credit history for up to 10 years and can have a devastating effect on your future financial plans.
In extreme circumstances, and always as a last resort, consider filing Chapter 13 bankruptcy protection. This allows an individual to setup a repayment plan of between 3 to 5 years to pay off all or part of their debts. You must have sufficient income to permit a portion of it to be used toward your repayment schedule.
Another option is Chapter 7 bankruptcy which is the most commonly filed chapter since it can completely eliminate all of your debt except the ones you choose to continue paying. There are exceptions to debts that can be discharged and to what property is exempt from being taken by your creditors. You should discuss any bankruptcy actions with a competent bankruptcy attorney. Only individual's may file for chapter 7 or chapter 13 bankruptcy.
Just because you are behind on your bills doesn't mean that your bill collectors can do what ever they want to collect their debt. You have rights under the Fair Debt Collection Practices Act. It would be a good idea to visit The Federal Trade Commission's web site http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm to find out what your legal rights are.
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Terry Rigg is the author of Living Within Your Means - The Easy Way http://www.homemoneyhelp.com/ebookadpage.html and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site http://www.homemoneyhelp.com. He has 25 years of experience counseling individuals and families concerning their personal finances.
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(Repost; Originally posted August 15, 2002.)
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